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Saturday, October 25, 2008

City finances threaten revitalization, point to state takeover

Economic revitalization should be priority number one for any city government in Trenton, but current city fiscal policies have resulted in a multi-million dollar budget shortfall that threatens the city with a massive tax rate increase that will create tax conditions that are adverse to redevelopment.

It also looks like such a tax increase won't even cover the budget gap, likely forcing the city into asking for a state-funded bailout sure to come with the institution of state oversight on the city's finances.

Right now the City of Trenton proposes a budget that assumes that the state Board of Public Utilities will approve a plan to sell outlying Trenton Water Works infrastructure to a private company for $100 million.

Despite that infusion of $100 million, the proposed budget carries a 13-cent tax rate increase, bringing the City of Trenton's property tax rate to $2.58 per $100 of assessed value. That rate hike, plus other measures including layoffs, will go towards closing a $7 to $8 million budget gap.

Already, lower property values in much of the city and a lack of up-to-date property assessments result in a city tax rate that is one of the highest in the county. A lack of growth in ratables and ineffective cost-saving measures in the government means constant, large-scale tax increases.

But now, regardless of those conditions, both city and state officials are saying the proposed water works sale may not receive approval, which would balloon the city's budget shortfall up to an astounding magnitude of $27 million.

No one is quite sure where such a shortfall will be made up, but adding significantly to the city's tax rate will result in a situation where anyone considering the purchase of property in the city is going to think twice, as soon as they see Trenton's large and growing municipal tax rate.

Perhaps the only good thing that could come out of such a large budget shortfall is that the city could be forced into begging for a state-funded bailout.

Given the financial footing of state officials, who recently identified falling state tax revenues and their own budget shortfall, such a bailout will likely come with a stipulation of state control over the city's finances.

Given what the Palmer administration has been doing with the city's money lately, this could certainly be a good thing.

2 comments:

Nicholas Stewart said...

I am baffled by City Council's even allowing city Business Adminstrator Feigenbaum to propose layoffs of rank and file municipal employees. The reall savings is in the ridiculous amount of aide positions in the administration.

City Council SHOULD be looking at those positions FIRST.

Mr. CleƤn said...

...and the Palmer Legacy grows...